Why Innoviz shares crashed on Thursday

What happened

Leading automotive technology company Innoviz Technologies (INVZ -7.66%) was not so sharp in the stock market on Thursday. Shares of the company closed nearly 8% lower, compared to the relatively modest 2% drop in the S&P500on the news that he’s looking for a big chunk of new funding.

So what

In a regulatory filing, Innoviz disclosed that it was aiming to raise $200 million from investors. It plans to do so by issuing new common stock, warrants, debt securities and units. This will be done in one or more issues, the company added.

The filing took the form of a shelf record, a document that serves to signal a company’s intention to raise funds.

As such, these documents are often not very specific regarding types of funding instruments, timing, purpose, etc. This was the case with the Innoviz filing, although it is likely that the start-up company is simply aiming to shore up its finances.

Now what

Still, investors were justified in worrying. Israel-based Innoviz has just over 135 million shares outstanding and a market capitalization of just under $670 million. If most or all of its planned $200 million financing is in equity, such an issuance could be highly dilutive for existing shareholders.

And while its position as a reputable maker of lidar solutions — seen as a crucial technology for assisted driving and (eventually) autonomous vehicles — gives it a decent shot at success, the company has consistently posted losses. Its current level of long-term debt far exceeds its income, a factor that could make debt issuance somewhat difficult.

Eric Volkman has no position in the stocks mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.

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